The Health Care Bill will ____ Small Business

health billWill the health care bill help or hurt small business owners? That mainly depends on one factor: whether or not they already offer health insurance.

If you own a small business that presently offers health care, the health care bill will obviously help your profitability. A central feature of all the proposals is the creation of a national risk pool, which would eliminate the penalty small businesses face because of their tiny risk pools. This would enable small businesses to compete for labor with larger businesses, and it may even bring rates down.

Macroeconomics dictates what will happen next: the marketplace will reward employers who have already been offering health insurance. Your competitors who do not presently offer health insurance will see their costs increase at the same time yours decreases. They will respond by providing the absolute bare minimum necessary to comply with the health law, then raising prices while yours remain constant. This will result in greater market share for you, which will result in your needing to hire more employees, with benefits that exceed the bare minimum.

US Small Businesses will not become less competitive, because we already can’t compete with countries that have lower labor costs. An 8% increase in labor costs will not make us less likely to take business away from a factory in China where workers earn $40 per month. US Small Businesses compete with each other–and if they all have to offer health insurance nothing will change except that their workers, and our economy, will be healthier. A recent government imposition of health regulation that was bitterly fought by small business may provide a glimpse into the future: when New York City banned smoking in bars and restaurants, their owners predicted the end of Manhattan nightlife. Guess what–people adjusted. Quickly. Given no choice, people gave up smoking inside but not drinking. The model has proliferated nationwide.

If you don’t offer health care to your employees, that means one of three things:

1.  You are bad at math: your employees are paying for their own health care with after-tax money. Which means you have to pay them at least $1200 (which costs you a minimum of $1400 after employer taxes and workers comp) for them to be able to afford an $800 per month policy. In the short run, your expenses will increase–but you will be able to adjust income for new hires and your existing employees will end up having far more discretionary income at no extra cost to you. Unfortunately, you didn’t understand what I just said, and that blonde lady on Fox say “health care bill bad”.

2.  You are great at math: your employees are on Medicare or some other form of public assistance–which means other businesses are paying for your workers’ health insurance. That’s a great deal that I can’t blame small businesses for fighting to keep. Unfortunately, the present system will bankrupt our country in the near future. You will likely find a way to punish your workers for this, but since you are probably paying minimum wage it will take a while for you to recoup these funds. You know exactly what you are fighting against, and your employees are also fighting against this bill because they see it as a battle between the Medicare they already have, and the hurt The Man will bring down on them if he has to pay for your insurance.

3.  You see your employees as unskilled and replaceable. That might actually be the case–because the employees you’d want to retain are working at some other company that offers health insurance. But that is never the case with “the job”–as I’ve learned owning a small business, showing up for work on time, the ability to be trained and improve on your own, and working well with others is a skill that is increasingly rare in America. Or, you are the only game in town–most likely a small town in the Southeast. Either way your employees have no health insurance. They come to work sick, or miss more work than they need to, or switch jobs as soon as they need health insurance. Short term bad, long term good.

It might help to understand why businesses began offering health insurance in the first place. Back in the day of The Organization Man, when tax rates for executives exceeded 50%, health insurance was a non taxable perk that actually paid for itself by keeping key men healthy. When tax rates began falling, company provided health care was taken for granted as a perk necessary to attract talent. So health was a white collar tax shelter. Blue collar workers got their insurance courtesy of labor unions. Health insurance is still a privilege of white collar workers and unionized blue collar workers. This bill will benefit non union, blue collar workers and their families more than any other demographic. It will also hurt their employers in the short run. They’ll get over it.

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